SOUTH BEND — After months of negotiation that included a controversial tax hike, South Bend Common Council members approved a new budget. The unanimous vote clears the way for the city to spend nearly $178 million next year, including $62 million on operating expenses.
Th new budget marks a 4% decrease in total spending (including road funding, pension funding and other accounts), and an 8% decrease in spending for municipal operations in the city's general fund.
"We tried to prepare for the worst, and hope for the best," said South Bend Common Council member and Personnel and Finance Committee Chairman Tom LaFountain (D).
It's the motto city leaders say they've lived by for the last 12 months, while shaping what many called the toughest budget in the city's history. Because of Indiana's recently enacted property tax caps, revenue to many forms of municipal and county government was drastically reduced. The full weight of the tax cap reduction hits in 2010.
On Monday night, the "best and worst" approach became ingrained in next year's budget as council members cast a series of unanimous votes in favor of the lengthy spending plan.
On one side there are the "worst" portions:
-56 city employees will be cut from next year's payroll. That's on top of 25 positions cut in 2009. According to city leaders, the city has reduced its workforce by 15% since 2000.
-Salaries and benefits for all non-union employees, including the mayor, clerk and common council will be frozen at 2009 levels.
-Employee out of pocket health care costs will be increased due to a new "80-20" health insurance plan. Projected savings to the city are $1.3 million per year.
-City backed $500 per year contributions to employee flexible medical spending accounts will be eliminated. Projected savings to the city are $600,000 per year.
-Many general government departments will see budget cuts of up to 10%.
"This is still $6 million in cuts. And, people are going to start feeling the effects of the budget as the year goes on. And, they may find out they're not going to be happy with some of the services not being available to them. But, that's where we are right now," said LaFountain.
Then there's the "best" part.
Thanks to the recent passage of St. Joseph County's 0.95% local option income tax hike (LOIT) and some federal stimulus and grant funding, South Bend Police, South Bend Fire, and South Bend Code Enforcement Departments will be fully staffed. Police budgets include full funding for 260 sworn officers. Fire budgets include full funding for 248 sworn firefighters.
In addition, nearly all Parks Department programs will be preserved, including the East Race Waterway, Howard Park Ice Rink, Newman Center, both city swimming pools, and Potawatomi Zoo.
Last summer, South Bend Mayor Steve Luecke said most of those parks programs would be placed on the chopping block, along with up to 40 firefighter positions and 17 police officer positions if the LOIT increase wasn't passed.
"Those were priorities we heard from the public, as well as from the council. We're still streamlining government. We're making cuts. But, we are able to, we think, provide those essential services that our community wants," Luecke said.
Without the LOIT funding, both Luecke and LaFountain said the budget would have looked drastically different.
"Public safety was our number one priority. And, the way the tax was set up, to get to the public safety, we had to move on the LOIT. Without the LOIT tax, we would have been in some dire straits," said LaFountain.
"Without the local income taxes, it really would have been, well, a disaster, I think," Luecke said. "We know this was a difficult decision, but we're replacing just some of the dollars and putting them to the highest priorities for our community."
But, some aren't convinced that disaster scenario would really have happened — even without a LOIT increase.
"To a degree, we have to give everybody credit for getting the job done. But, we're still paying one percent more in sales tax. We're still paying more in LOIT, or option income tax. I think if we had taken the Distressed Unit Appeals Board option we would not have had to add the option tax.," said South Bend Common Council member David Varner (R).
Varner, along with with Council member Henry Davis, Jr. (D), voted against the LOIT increase.
"I think we could have planned to grow out of this without adding the options tax. It would have been tougher. But, we were able to make some cuts. I think, if the Mayor would pursue some annexations that he's been unwilling to do in the past, that would add to our assessed valuations," Varner continued.
Varner points to Fort Wayne, who he says added about 20% to its population within the last 20 years.
"They set annexation about 10 years down the road to give folks time to adapt. We could offer that same type of opportunity around here and achieve some of the growth I think we need to do," Varner said.
Ignoring that option, Varner warns, will leave the city with a familiar choice again next year:
"We're down to the same place we were a year ago. We either grow our way out of it, or the Mayor's going to be back in a year or so trying to tax us out of it," Varner said.
But, Luecke says his goal is to use the new "leaner" 2010 budget as a new baseline for spending in the years to come.
"We clearly heard that our customers want us to streamline. We've been doing that. And, investing in economic development is going to be key for us as we move forward to bring new jobs and new investment to the community. That will help us raise that assessed value baseline," Luecke said.
But, is that much growth — that quickly — realistic?
"The reality of the situation is: we're not going to have the kind of funding we had, and we may not see that kind of funding for a long time," said LaFountain.
"The effects of the recession may not be fully felt until next year," he continued, taking a deep breath. "This may be our benchmark, but we may have a lot lower still to go."
